"Is this normal? Are bonds meant to return 34 percent?" Saker Nusseibeh, CEO of Hermes Investment Management, told CNBC Monday, raising concern about this kind of performance by a government bond.

The collapse in gilt yields is the result of renewed safe-haven demand, the resumption of quantitative easing and the U.K. central bank's decision to cut interest rates by a quarter of a percentage point earlier this month, according to a report by Pantheon Macroeconomics.

Nusseibeh criticized the U.K. central bank for cutting interest rates, which served to boost the prices of U.K. treasuries. "I understand why the Bank of England (BOE) did what it did. I'm not entirely convinced it boosts consumer spending, because, unlike in the continent, it's not being passed through," he said.

"The Bank of England had no alternative because there's uncertainty, but it highlights we are in an 'Alice in Wonderland' (scenario, where) gilts become like growth stocks," he added.

Betsie Van der Meer | Stone | Getty Images

Alice in Wonderland at the Mad Hatter's Tea Party

Is this the bottom?

With the BOE hinting that it could act again with more stimulus, analysts have been busy debating whether this is the bottom for yields.

"It is increasingly difficult … to see how gilt yields could fall much further from here," argues Samuel Tombs, chief U.K. economist for Pantheon Macroeconomics, in a report published last week.

According to Tombs, U.K. interest rates cannot move further south, as BOE Governor Mark Carney has ruled out negative rates. In addition, future rounds of quantitative easing and bond purchases by the Bank of England will prove less effective.

"The outlook for much higher inflation, mainly due to sterling's depreciation, likely will push up yields soon," Tombs said. "We expect 10-year yields to rise to 0.8 percent by the end of this year and to 2.0 percent by the end of 2017."